Bitcoin cannot rise, while other currencies are still falling. Has the “artificial bull market” come to an end?

Due to the lack of fundamental support, the market tends to collapse again after the "artificial bull market" is over. Investors will also suffer heavy losses due to chasing highs and selling lows.

"Similar to the stock market, this year's digital currency market is also an artificial bull market." Chen Zhicheng, a veteran digital currency player, told Yiben Blockchain.

In the cryptocurrency world, the price of Bitcoin is comparable to the "market index" - its rise and fall will become an important basis for investors to judge the overall trend of the digital currency market. "In the last bull market, Bitcoin led the rise, and other currencies followed suit, and even rose more. But in this bull market, this law has failed." Chen Zhicheng said.

Unlike the previous bull market, in this round of rise, only Bitcoin and related mining industries experienced an explosion. Not only did other currencies fail to rise sharply, some currencies even plummeted.

Ethereum, one of the mainstream currencies recognized by investors, is a typical example.

According to CoinMarketCap data, in the last bull market, the price of Ethereum reached a historical high of $1,422. In this round of market, the highest price of Ethereum is $332, which is 76% lower than the highest point of the last bull market.

According to the same algorithm, the highest prices of Bitcoin in these two rounds of market conditions only differed by 34%.

In other words, compared with Ethereum, Bitcoin has recovered more in this round of market.

"It is not difficult to see from Ethereum's K-line chart that Ethereum's current price is the same as in November 2018. At that time, the entire digital currency market was the coldest." Chen Zhicheng told Yiben Blockchain.

IEO, which was once regarded as the "bull market fuse" by cryptocurrency investors, has gradually receded.

At the beginning of this year, IEO was very popular. On January 28, BTT was launched on Binance through the IEO model and was quickly snapped up. Within 13 minutes and 25 seconds, 23.76 billion BTT were snapped up. Subsequently, Huobi, OKEx and other exchanges opened IEO channels.

However, almost all IEO projects start high and end low, and they have long since become a game of passing the parcel.

Take Huobi's first IEO project TOP as an example. On the fifth day after its launch, the price of TOP began to fall. Today, the price of TOP is only $0.004516, down 77.5% from its peak.

The first IEO project CNNS launched by Gate Exchange in April was halved the next day, triggering investors to defend their rights.

"IEO has come to an end in this round of market, and investors have lost their initial enthusiasm for IEO," said Chen Zhicheng.

In this wave of market, the prices of most altcoins do not seem to rise along with Bitcoin, and can even be described as “unmoved”.

"Many altcoins that were born during the ICO wave are now dead," said investor Chen Kang.

In August 2018, he invested in a digital currency called "GCS" on the BigONE exchange. Its current price has fallen by 99% compared to his purchase price, close to zero.

"What's even more despairing is that the 24-hour fluctuation of the GCS price is 0, which means that it has no trading volume and has become stagnant," said Chen Kang.

GCS price curve, data source: BigONE

GCS is a microcosm of many altcoins - in this round of market, despite the sharp rise in Bitcoin, altcoins remain sluggish.

Financial analyst Xiao Lei believes that one important reason for the recent surge in Bitcoin prices is that as an emerging asset, Bitcoin is increasingly attracting the attention of high-net-worth individuals.

“These high-net-worth individuals usually hand over their investment matters to professional wealth management institutions,” Xiao Lei told Yiben Blockchain. “And now, these institutions have also begun to recommend Bitcoin to the rich.”

In other words, digital currency has become one of the asset allocation targets.

Wealth management institutions are rushing to enter this market. "If we don't promote it, other institutions will, and no institution wants to lose customers because of this," said Xiao Lei.

In May of this year, digital currency analyst Rhythm tweeted that “Grayscale Investments purchased more than 11,000 BTC in April 2019, accounting for about 21% of the global monthly supply of BTC. Institutional investors are in a state of FOMO (fear of missing out).”

Grayscale is one of the well-known digital currency asset management companies in the United States. They have been promoting a campaign called "Abandon Gold" to try to convince more people to invest in the digital assets they manage.

The interest rate cut signal released by the Federal Reserve is also one of the potential reasons for the rise in Bitcoin.

At the beginning of this year, after concluding its first interest rate meeting in 2019, the Federal Reserve announced that it would not raise interest rates for the time being.

In the statement of this meeting, the Fed also deleted the two important phrases "further gradual rate hikes" and "the risks facing the economic outlook are roughly balanced." Most market participants expect that the Fed's current round of rate hikes is nearing its end.

The Federal Reserve is holding its fifth interest rate meeting this year, and the results of the meeting will be announced tomorrow morning Beijing time. Global investors and economists generally expect that the Federal Reserve may announce its first interest rate cut plan in more than a decade.

The direct result of the Fed's interest rate cut is a decline in the US dollar, which will also make the market favor safe-haven assets such as gold, crude oil, and digital currencies again.

In June this year, the price of gold broke through the $1,400 per ounce mark, setting the highest closing price since 2013.

As an emerging asset, digital currencies represented by Bitcoin are often regarded as a type of safe-haven asset. But in fact, the rise and fall of digital currencies are far greater than those of mainstream assets.

Investors who buy digital currencies as safe-haven assets are mostly risk-averse. The only investment target they choose is Bitcoin, which has the highest market value and is the most recognized in the cryptocurrency circle.

"The ICO bubble has burst and investors cannot see the value of altcoins," said Chen Kang.

As Bitcoin continued to rise, investors began to sell their altcoins and buy Bitcoin. Bitcoin's blood-sucking effect became increasingly obvious.

CoinMarketCap data shows that as of July 31, 2019, the total market value of global digital currencies was US$29.34 billion, of which Bitcoin accounted for 64.6%.

Today's digital currency market is absolutely dominated by Bitcoin.

In his opinion, the price of Bitcoin will continue to fluctuate around $10,000 for a long time. It will be difficult for Bitcoin to double in price for a period of time.

The biggest reason restricting the further rise of Bitcoin is its limited value.

"The biggest value of Bitcoin now is that it serves as a value storage tool. Compared with physical assets such as crude oil, the use value of Bitcoin is almost negligible." Yin Haotian said, "And the anonymous transaction and asset transfer functions that Bitcoin is proud of are also of little significance to legal capital."

Currently, the market value of Bitcoin is close to $200 billion. If the price of Bitcoin increases 10 times, its total market value will reach $1.74 trillion. This is close to the market value of 2 Apple companies, or the total annual GDP of Brazil.

"As a technology company serving global users, Apple's stock is anchored by a large amount of physical assets. Investors can get dividends by purchasing Apple stock. The embarrassing thing about Bitcoin is that this asset itself does not generate any income," said Yin Haotian.

Therefore, he believes that it is impossible for Apple's market value to be surpassed by Bitcoin. What's more, most Bitcoin holdings are very concentrated nowadays.

In addition, the excessively high market value of Bitcoin has also become an obstacle for "market makers to pull up the price."

"For a company with a market value of 10 billion US dollars, the main capital investment of 1 billion US dollars can pull up 70%-80% of the market; but for Bitcoin with a market value of nearly 200 billion US dollars, investing tens of billions of funds will only make a splash," said Yin Haotian.

Therefore, he believes that the price of Bitcoin exceeding $100,000 is just wishful thinking of some people.

"If Bitcoin is used as a game chip, the only profit model for investors is to buy low and sell high." He said that since it is a game chip, there are pull-ups and wash-ups. For example, since the second half of last year, the price of Bitcoin has fluctuated and fallen, and many investors have sold their stocks at a loss at the $3,000 stage.

In his opinion, this is a washout of Bitcoin. After this, Bitcoin will go through another long washout phase. "The dealer will not pull the price unless the players who bought Bitcoin at $10,000 are washed out," Yin Haotian said.

Miner Wu Di also believes that it is difficult for the price of Bitcoin to continue to soar.

In fact, mining costs are one of the few "anchors" of Bitcoin prices. From the perspective of production costs, the current electricity cost of a 7nm mining machine to mine one Bitcoin is only about $2,000, which is much lower than the secondary market price of Bitcoin.

"If one day the price of Bitcoin reaches $100,000, it means that the growth rate of mining costs has far exceeded the development rate of the chip industry," Wu Di said, "and Moore's Law will come to an end."

"Bitcoin's decentralization is only technical decentralization, while Bitcoin's price is 100% centralized," said an investor.

This "artificial bull market" may be coming to an end.

*Some of the interviewees in this article are pseudonyms.

Source: A Blockchain

Author: Pizza